The fourth quarter of 2018 saw a change of direction from the previous quarters with most IA sectors in negative territory.
A change of rhetoric from the Federal Reserve following their latest rate hike served to highten already nervous sentiment and create a bolt for profit taking and safe assets, particularly in the final month of the year.
The IA UK Index Linked Gilt was the best performing sector gaining 2%, with the IA UK Gilt sector next best rising 1.6%. On the flipside the IA North American Smaller Companies sector was the laggard returning -17.7% with the IA Japanese Smaller Companies sector the next worst falling 17.1%.
The IA UK Equity Income sector was the strongest performer of the UK equity sectors falling 10.9% with the IA UK All Companies sector next best falling 12.5%. The IA UK Smaller Companies sector was at the back of the pack losing 15.9%.
The IA UK Index Linked Gilt sector led in the UK bond space rising 2%, with the IA UK Gilt sector next best gaining 1.6%. The IA £ Corporate Bond sector lost 0.5% in comparison, The IA £ High Yield sector was the worst of the UK bond sectors falling 4%, with the IA £ Strategic Bond sector by comparison falling 1.3%. The IA Global Bond sector sat in the middle of somewhat gaining 0.3% in the quarter.
The IA Targeted Absolute Return sector failed to live up to its name, falling 2.3% in the quarter. The 12-month return for the sector remains a very disappointing -2.7%.
Looking at the Mixed Asset IA sectors, the exposure to equity dictated the ranking of the sectors with the IA Mixed Investment 0-35% Shares sector leading the pack falling 3.1%. The IA Mixed Investment 20-60% Shares sector was the next best falling 5.5% with the IA Mixed Investment 40-85% Shares the laggard falling 8%.
The IA Global Equity sector fell 11.6% against a fall of 8.8% for the IA Global Equity Income sector as the defensive qualities of Income assets helped a little in nervous conditions.
The continued saga around Brexit and last-minute delay to the House of Commons vote served to only weaken sterling at a time of heightened tension in global markets. With the US dollar also compromised as concern grew over the trajectory of the economic path States side, the Yen again became the go-to defensive play in the quarter.